Question
Bob's Furniture Store Balance Sheet as of December 2010 & 2011 2010 2011 Cash 11,250 650 Accounts Receivable 15,625 20,800 Inventory 36,250 59,150 Total Current
Bob's Furniture Store
Balance Sheet as of December 2010 & 2011
| 2010 | 2011 | |
| Cash | 11,250 | 650 |
| Accounts Receivable | 15,625 | 20,800 |
| Inventory | 36,250 | 59,150 |
| Total Current Asset | 63,125 | 80,600 |
| Land | 25,000 | 33,800 |
| Building | 87,500 | 130,000 |
| -Accumulated Depreciation | 35,000 | 49,400 |
| Total Fixed Assets | 140,625 | 195,000 |
| Total Assets | 140,625 | 195,000 |
| Accounts Payable | 13,125 | 28,600 |
| Short-Term Bank Notes | 21,250 | 61,100 |
| Total Current Liabilities | 34,375 | 89,700 |
| Long-Term Debt | 35,938 | 29,835 |
| Common Stock | 39,374 | 40,950 |
| Retained Earnings | 30,938 | 34,515 |
| Common Equity | 70,312 | 75,465 |
| Total Liabilities and Equity | 140,625 | 195,000 |
| Income Statements | ||
| Years Ending December 2010 and 2011 | ||
| 2010 | 2011 | |
| Sales (all credit) | $187,500.00 | $400,000.00 |
| Less: Cost of goods sold | -$112,500.00 | -$240,000.00 |
| Gross profit | $75,000.00 | $160,000.00 |
| Operating expenses | ||
| Fixed cash operating expenses | -$31,500.00 | -$52,500.00 |
| Variable operating expenses | -$18,750.00 | -$40,000.00 |
| Depreciation | -$6,750.00 | -$25,000.00 |
| Total operating expenses | -$57,000.00 | -$117,500.00 |
| Earnings before interest and taxes | $18,000.00 | $42,500.00 |
| Interest expense | $5,719.00 | $9,094.00 |
| Earnings before taxes | $12,281.00 | $33,407.00 |
| Taxes | -$6,141.00 | -$16,703.00 |
| Net income | $6,141.00 | $16,703.00 |
A. Calculate the financial ratios for 2010 and 2011.
| Calculate the following financial ratios for 2010 and 2011 | |||
| 2010 | 2011 | Industry | |
| Current ratio |
|
| 2.00 |
| Acid Test Ratio |
|
| 0.80 |
| Average collection period |
|
| 37.00 |
| Inventory turnover |
|
| 2.50 |
| Debt ratio |
|
| 58.00% |
| Times interest earned |
|
| 3.80 |
| Operating profit margin |
|
| 10.00% |
| Total asset turnover |
|
| 1.14 |
| Fixed asset turnover |
|
| 1.40 |
| Operating return on assets |
|
| 11.40% |
| Return on equity |
|
| 9.50% |
B. Compare and evaluate Bob's Furniture store 2011's ratios in terms of liquidity, capital structure, asset management efficiency, and profitability to the industry standard.
C. At the end of 2011 the firm has 15,000 shares of common stock outstanding, selling for $15 each. Find the following:(i) earnings per share
(ii) price-earnings ratio
(iii) market to book ratio?
*Show all steps and formula*
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Authors: Gary Miliefsky
2nd Edition
1962595900, 978-1962595902
